WASHINGTON: Managing Director of the International Monetary Fund Kristalina Georgieva warned on Thursday that the global economy continues to face challenges despite some signs of recovery due to the possibility of a second wave of COVID-19, and urged governments to keep their support programs in place.
Activity “has started to gradually strengthen… But we are not out of the woods yet,” Georgieva said in a message to G20 finance ministers ahead of their weekend meeting in Saudi Arabia.
The Washington-based crisis lender late last month downgraded its growth forecasts, and now expects global GDP to fall by 4.9% this year due to the deeper contraction during lockdowns than previously anticipated, and only a “tepid recovery is expected for next year.”
The $11 trillion in stimulus provided by the G20 nations helped to prevent a worse outcome, but “these safety nets must be maintained as needed and, in some cases, expanded,” Georgieva urged in a blog post.
She highlighted measures including paid sick leave for low-income families and access to health care and unemployment insurance.
But the recovery faces risks, she said, including the possibility of “a second major global wave of the disease could lead to further disruptions.”
While she acknowledged that the “substantial and rising debt levels are a serious concern,” Georgieva said, “At this stage in the crisis, however, the costs of premature withdrawal are greater than continued support where it is needed.”
Many countries have moved to reopen, so, “Clearly, we have entered a new phase of the crisis,” she said in a blog post, adding it will require “further policy agility and action to secure a durable and shared recovery.”
Many jobs that have been lost amid the pandemic may never come back, so workers will need support and training to move into new sectors.
“The bottom line is that the pandemic is likely to increase poverty and inequality,” she said but noted that policymakers have “a once-in-a-century shot” at building a better, greener and more equitable world.